Double Dividend in an Endogenous Growth Model with Pollution and Abatement

Esther Fernández, Rafaela Perez and Jesus Ruiz

No E2004/15, Economic Working Papers at Centro de Estudios Andaluces from Centro de Estudios Andaluces

Abstract: This paper discusses wether by implementing an environmental tax reform, a government may achieve a double dividend. We consider the simplest endogenous growth model (AK model) and include a negative environmental externality in the utility function. Pollution flow can be reduced by means of private abatenment activities. There is a predetermined non-optimal level of public spending financed by environmental taxes and pre-existing taxes on income and consumption. The major contribution of the paper is to show that, under this simple framework, a double dividend may arise if tax reform consists of substituing environmental tax for income tax, in such a way that the government budget constraint holds in a present value sense.

Keywords: Environmental tax reform; Double dividend; Abatement activities. (search for similar items in EconPapers)
JEL-codes: H23 O41 Q28 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2004
New Economics Papers: this item is included in nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: Double Dividend in an Endogenous Growth Model with Pollution and Abatement (2008)
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